Driving Upstream Cost Improvements

by | Mar 6, 2018 | Event, Industry, Oil & Gas

At CERAWeek 2018, Emerson Automation Solutions executive president Mike Train joined a panel, Outlook for Upstream Costs and Technology, led by IHS Markit’s Pritesh Patel and Judson Jacobs. Other panelists included leaders from ADNOC, the Norwegian Petroleum Directorate and Baker Hughes. Here was the description for this panel session:

With the reality of low oil prices, a given, and upstream construction forecasted to rise, assets are still struggling to meet economic hurdles, and operators are still turning to lower supply chain costs, leaner designs, and new development approaches to improve their viability. Can technology continue to enable these new design concepts and operating models or will cost escalations continue to slow down upstream activity? What impact is technology having on current industry capital and operating efficiency?

The panel opened with Judson discussing how current costs have been climbing in areas like the Permian Basin given the increased level of activity. Over the last several years, significant productivity gains have been made in drilling and production facilities. They also noted that while huge amounts of data were being created in both the exploration and production sides of the operations, this data was not being fully exploited to improve efficiency and reliability. Digitalization in the offshore production side have achieved 20% savings to date with a target of 40% over the next few years.

Some of the key points made by the oil & gas producers on the panel was the rapid advancement in drilling technology where they have seen 30-40% reductions. Mike opened noting that for capital projects, more than 65% of projects over $1B fail. And even 35% of smaller projects fail—where failure is defined as 25% over budget or 50% over schedule. When you add that up, the manufacturing and production industries are losing over $400 billion.

Mike Train at CERAWeek 2018 on Upstream Technology

Emerson Automation Solutions Executive President Mike Train discussion technology’s role in driving down upstream oil & gas production costs at CERAWeek 2018

From an operational perspective, top performers achieve significantly greater key performance indicators than their average peers—2/3 fewer safety incidents, 2 weeks of additional production with 20% less costs, and 30% less carbon emissions and energy use.

Mike sees digital transformation as the foundation of achieving top quartile performance in projects, operations, and productivity. For a digital transformation, by adopting best practices and building out these competencies, oil and gas producers can use latest advancements in technology and the Industrial Internet of Things architecture to drive improved performance.

A very important aspect of these digital transformations is the people side. Mike highlighted five essential competencies for oil & gas producers to achieve successful digital transformation: automated workflow, mobility, workforce upskilling, decision support, and change management.

From a changing business model perspective, Mike noted that there is a shift in companies sharing some of their non-confidential data, in a highly secure transfer method, where suppliers such as Emerson have unique expertise. These connected services may include things like control valve, instrumentation and control system performance monitoring to name a few.

Visit the Project Certainty and Operational Certainty areas of Emerson.com to learn more about ways to improve overall business performance.

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The opinions expressed here are the personal opinions of the authors. Content published here is not read or approved by Emerson before it is posted and does not necessarily represent the views and opinions of Emerson.

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